DOUBLE-CROSSED / Silicon Valley entrepreneurs say they have been betrayed by venture capitalists and lawyers, the very people they asked for help

Reynolds Holding, Chronicle Staff Writer

Published 4:00 am, Wednesday, November 17, 1999

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Shyam Das, who is working to spend more time
with his youngest son, Anshu, was fired from his own company Chronicle Photo by Brant Ward

Shyam Das, who is working to spend more time
with his youngest son, Anshu, was fired from his own company Chronicle Photo by Brant Ward

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``He is fierytempered,'' said one entrepreneur who declined Sierra Ventures' financing after Jeffrey Drazan demanded that his company be the sole investor. Chronicle Photo by Brant Ward

``He is fierytempered,'' said one entrepreneur who declined Sierra Ventures' financing after Jeffrey Drazan demanded that his company be the sole investor. Chronicle Photo by Brant Ward

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Lawyer Larry Sonsini, once called the ``consigliere of Silicon Valley,'' handled the initial public offering of Apple Computer's stock,
one of the best-known deals in high-tech history. Chronicle Photo by Brant Ward less

Lawyer Larry Sonsini, once called the ``consigliere of Silicon Valley,'' handled the initial public offering of Apple Computer's stock,
one of the best-known deals in high-tech history. Chronicle Photo by ... more

DOUBLE-CROSSED / Silicon Valley entrepreneurs say they have been betrayed by venture capitalists and lawyers, the very people they asked for help

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(Third of five parts)

Silicon Valley is the epicenter of the fastest creation of wealth in history. But the High-tech miracle has a dark side: untold stories of ruined investors, betrayed entrepreneurs and regulators who are overmatched and overwhelmed.

In June 1997, Shyam Das sat down for sodas with venture capitalist Jeffrey Drazan at the Peppermill Restaurant in Cupertino.

Drazan and his firm, Sierra Ventures, had put about $7 million into the company Das founded the year before, and after a few minutes of small talk, Drazan said he wanted another Sierra director on the board.

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Das was wary. For years, he had worked alone to perfect the company's product -- an ingenious device capable of storing more data on a computer disk than anyone thought possible. And he could feel Drazan prying it away.

But Drazan assured him they would "always be together," so Das relented.

It was a critical mistake.

Two months later, Das was out, fired from his own company -- with Drazan's new director casting the deciding vote. And although Das still held millions of shares of company stock, he said the directors eventually found a way to betray him one more time.

"When I handed over this company," Das said, "it was just like losing a child."

Every year, hundreds of entrepreneurs like Das create high-tech companies with the hope of striking it rich. Although most know the risks of the open market, few expect to lose their startups to the professionals they depend on for advice and support.

But over the past decade, some of the high-tech industry's most prominent venture capitalists and lawyers have been accused of stealing companies from the entrepreneurs they agreed to finance and of betraying clients they were hired to represent.

"So much of this is happening out there," said Santa Clara Superior Court Judge Conrad Rushing, who presided over a trial involving several venture capitalists. "What I see in lawsuits is just the tip of the iceberg."

Silicon Valley's venture firms control an estimated $22 billion of capital, and in the roiling, high-risk markets of the high-tech industry, they're not afraid to seize control of a company or force its founder out.

But to call them to account would be financial suicide for almost any entrepreneur.

"Suing venture capitalists is like suing the Mafia," said Michael Kalashian, an entrepreneur who wrested a $15 million settlement from venture capitalists four years ago. "In the valley here, anyone who is in business somehow interacts with the VCs . . . and they're terrified."

The power of Silicon Valley's top venture capitalists is rivaled only by the elite attorneys who represent them, the partners at megafirms that also represent virtually all of high-tech's largest corporations. Inexperienced entrepreneurs hire these firms at their peril, often discovering that the attorneys have sold them out for more profitable clients.

"It's worked like that down here for years," said a San Jose attorney who defends large high-tech companies in lawsuits. "Is it unethical? Well, to use a legal term: Hell, yes."

This is the story of how some venture capitalists and lawyers operate in Silicon Valley and how they pay little heed to laws prohibiting conflicts of interest and the abuse of minority shareholders.

It is also the story of some of the entrepreneurs and engineers who were ruined and left behind.

UNDISCLOSED LOYALTIES, 1987

Narpat Bhandari had a brilliant idea for a lightning-fast computer chip.

So he went to the most powerful law firm in Silicon Valley, believing that its contacts within the high-tech industry would help get his enterprise off the ground. But he says he soon learned what can happen when connections become conflicts -- and lawyers must choose between rival clients.

It all started in January 1987, when Bhandari, chief engineer of Fairchild Semiconductor's new products division, decided that after spending three decades as a chip designer, he would start his own company. Business plan in hand, he and a partner hired Wilson Sonsini Goodrich & Rosati, the influential Palo Alto law firm.

Name partner Larry Sonsini helped Bhandari revise the business plan, counseled him on resigning from Fairchild and made sure the new chip did not violate any patents, Bhandari says.

Over the next few months, Sonsini escorted Bhandari through the venture capital firms along Sand Hill Road in Menlo Park. Sonsini made a particular point of introducing Bhandari to John Doerr, Silicon Valley's premier venture capitalist and a director of high-tech giant Cypress Semiconductor.

Doerr pitched Bhandari's idea to Cypress, and the company was intrigued. It hired Bhandari as a consultant, and after months of negotiations, says Bhandari, orally agreed to pump $13.6 million into his startup, pay him $2 million and grant him stock in both the new company and Cypress.

But in August, Bhandari says he made a disturbing discovery: Sonsini was not only Cypress' attorney and secretary, he had incorporated and guided the company through an initial public stock offering and was representing its chief executive officer, T.J. Rodgers.

When Bhandari complained about the conflict of interest, Sonsini assured him that all was well. The attorney even suggested that his relationship with Cypress and Rodgers would help, according to court documents.

Bhandari did not want to lose Sonsini's influence, so he says he continued to retain Sonsini as legal counsel, even appointing him to Aspen's board of directors.

All Bhandari could do was hope for the best.

-- -- --

A calm and dignified counselor to a new generation of brash tycoons, Sonsini has been called the "consigliere of Silicon Valley."

At 58, he is one of the most powerful figures in the high-tech industry. He is a confidant, a matchmaker and a financial and legal strategist. He has drafted business plans for some of Silicon Valley's best known companies and introduced the partners of some of its most prestigious venture capital firms.

Born in the farm country of upstate New York, Sonsini came west to California with his family in 1949. He graduated from Berkeley's Boalt Hall law school in 1966. But rather than join a lucrative New York practice or clerk for a federal judge, he took a job with an obscure law firm run by John Wilson in a no-name valley south of San Francisco.

It was the best move Sonsini ever made.

He saw the possibilities in that valley, the potent, untapped energy of young companies and the freedom of a culture not yet formed. "It was the idea," he said, "of being able to build something."

At first, as the fourth attorney in a four-lawyer office, Sonsini handled as many divorces and slip-and-fall cases as incorporations for entrepreneurs.

But in the early 1970s he represented a company called ESL, which was run by a future secretary of defense named William Perry. ESL wanted to sell its stock publicly and was about to hire a major San Francisco firm when Sonsini intervened.

"I said, 'I can do this, and I can do it better,' " he recalled. "I just hated the idea of losing clients."

ESL stayed with Sonsini. So did Seagate Technology and Intel and LSI Logic, and before long, over the qualms of some of his partners, Sonsini had built a law firm that could serve almost every need of companies in the rapidly emerging high-tech industry.

Then, in 1980, Sonsini handled one of the best-known deals in high-tech history: The initial public offering of Apple Computer's stock. On December 12, Apple's shares rose by 30 percent, making dozens of Apple employees paper millionaires. Founder Steve Jobs' stock alone was worth $217 million.

Suddenly it seemed as if every high-tech company and entrepreneur wanted to be Sonsini's client.

"Now they weren't calling us out of loyalty," he said. "They were calling us because we were the best."

It wasn't long before the firm was in such demand that it occasionally found itself representing parties on opposite sides of a deal, a conflict of interest that ethics rules expressly prohibit unless waived by clients.

Sonsini acknowledges that "the technology industry is unique" in its potential for legal conflicts. But he says "it really isn't an issue. We are rarely in the same deal with two clients." And if they are, he says they ask clients for waivers, which many seem happy to grant.

Others, though, tell a different story -- of an untold number of entrepreneurs and engineers afraid to talk about what the law firm did to them.

"The number of conflicts cases (Wilson Sonsini) has settled so they never see the light of day is incredible," said one entrepreneur. "There's considerable fear of Larry Sonsini in the valley, fear by entrepreneurs who don't want to get blackballed."

-- -- --

It was Sonsini's reputation as the top attorney in Silicon Valley that prompted Bhandari to appoint him an Aspen director -- despite the lawyer's long-standing relationship with top Cypress officials.

Six months later, Sonsini and the other Cypress directors fired Bhandari as chief executive officer of Aspen.

And because Sonsini failed to document Bhandari's original deal with Cypress, Bhandari says he received none of the cash or stock he was promised.

As a final indignity, Fairchild, Bhandari's former employer, sued him for trade-secret theft.

Cypress CEO Rodgers said he fired Bhandari because five Aspen managers complained of a "leadership problem" and the company was three months behind in creating its project plan.

Sonsini contends that he told Bhandari to get a new lawyer in April 1987, according to court documents. Sonsini said he stopped representing Bhandari in May.

But Bhandari says he believed until his firing that Sonsini was his attorney. There was nothing in writing to indicate otherwise, he says.

He also says he believes Cypress dumped him to gain complete control of the chip technology he had created and the engineers and management team he had assembled.

"The smaller you are," Bhandari said, "the more they think you are nothing."

Bhandari spent the next eight years fighting in the courts. He sued Cypress, Rodgers and Aspen -- all defended by Wilson Sonsini -- and in September 1991 won a $750,000 judgment.

He defended himself against Fairchild, since acquired by National Semiconductor, and the company eventually dropped the case.

Finally, he sued Wilson Sonsini for malpractice, and after years of rancorous motions, the suit was settled confidentially.

A NEGLECTED DEFENSE, 1989

When Greg Galloway's thriving disk drive company was sued for trade-secret theft, he hired Wilson Sonsini to handle the case.

But according to his allegations in a lawsuit, Galloway would soon discover that retaining the valley's top law firm was no guarantee of an aggressive defense -- particularly if the firm's interests potentially conflicted with its client's.

Galloway's company was called Tronix Peripherals. In 1989, its competitor, Trace Products, accused it of stealing software code by hiring the code's author, a former Trace employee.

But almost from the beginning, the Wilson Sonsini attorneys made a series of puzzling mistakes, according to Galloway's lawsuit.

They discouraged Galloway and Tronix from reaching a settlement that might have limited the damages. They delayed filing a summary-judgment motion that could have cut the case short. They essentially admitted Tronix's liability in a letter to one of the company's own customers.

The alleged missteps worried Galloway, but he says that when he asked about them, he was told to concentrate on running his business.

Then Galloway learned that Wilson Sonsini represented a company called Applied Biosystems.

The author of the secret source code had worked at Applied Biosystems after leaving Trace and before joining Tronix. While at Applied Biosystems, and possibly at other firms, he had used the disputed source code, Galloway claims.

And if the author of the source code had used it at Applied Biosystems and elsewhere, it was no longer secret when Tronix obtained it -- meaning Tronix could not be guilty of trade-secret theft.

But the Wilson Sonsini lawyers failed to pursue that defense, Galloway claims, because they did not want to expose another client, Applied Biosystems, to legal liability.

Galloway says Wilson Sonsini never asked him to waive the conflicts created by its representation of Applied Biosystems, or another company with ties to his suit.

But the worst lay ahead.

On the eve of trial, Michael Ladra, the lead attorney on Galloway's case, abruptly announced that he would no longer handle the lawsuit, claiming that another client needed his immediate attention, according to Galloway. Wilson Sonsini attorney Peter Courture took over, but he was "totally unfamiliar with the facts, issues and evidence," Galloway claimed in court papers.

The trial was a disaster. In March 1991, a jury in Santa Clara Superior Court found Galloway liable to Trace for $1,386,749 in damages. Galloway also owed Wilson Sonsini $135,627 in legal fees.

The debts ruined Galloway. A year later he filed for bankruptcy, and Tronix closed its doors.

Galloway eventually sued Wilson Sonsini for malpractice, and the case was settled confidentially in 1996.

Ladra says Galloway's claims were "silly" and contends the firm didn't pursue the Applied Biosystems angle for many reasons, the main one being that "it would have actually been contrary to Galloway's interests."

Ladra also says Courture was fully capable of trying the case and Galloway was urged to settle "numerous times."

"The bottom line," he said, "is the guy lost the case, and so he decided to blame someone other than himself."

Galloway and Courture will not talk about the Tronix case or the malpractice suit.

"The one thing I have learned about legal battles," Galloway said, "is they have nothing to do with truth and justice but only how you develop the facts."

PILFERED SECRETS, 1991

It was every entrepreneur's worst nightmare.

One day EP Technologies was seeking venture capital financing to expand its medical equipment business.

The next day an entirely new company -- financed by the same venture capitalists -- arose to make exactly the same product for exactly the same market.

EPT's nightmare began in 1990, when the company decided to expand its medical equipment business and look for financing. After a three-month search, it contacted Sierra Ventures.

Founded in 1982, Sierra enjoyed a reputation as one of the most aggressive venture capital firms along Menlo Park's Sand Hill Road, headquarters for Silicon Valley's most prominent financiers.

"The ongoing joke is that they're greedy and avaricious -- and proud of it," said one former investor in a Sierra fund.

Sierra was intrigued by EPT's products for diagnosing and treating heart disease. So it asked for more information and received a stack of confidential documents describing the company's business and technology.

Over the next two months, Sierra studied every aspect of EPT. It hired one consultant to evaluate the company's technology and business potential and another to investigate the company's patents. It even introduced businessman Harry Robbins to EPT as a potential chief executive officer.

On Jan. 15, 1991, Sierra gave EPT a financing proposal. In March, the company responded with a counterproposal.

Then the deal went dead. On April 10, Sierra abruptly told EPT that there would be no further negotiations.

Company officials were stunned. But five days later they received even worse news: Sierra had agreed to finance CardioRhythm, a newly formed company that planned to compete directly with EPT.

CardioRhythm was founded by Robbins and the two general partners of the financing agent that had introduced EPT to Sierra -- George Savage and Andrew Thompson of Savage-Thompson Management. In exchange for Sierra's backing, the three founders granted the firm stock and seats on the board.

And it only got worse for EPT.

When the company asked another venture capital firm for financing, Sierra tried to persuade the firm to invest in CardioRhythm instead, according to court documents.

And later, when EPT discussed a merger with medical manufacturer Medtronic Inc., Sierra intervened and persuaded Medtronic to buy CardioRhythm.

Finally, on March 25, 1993, EP Technologies sued Sierra, accusing it of using EPT's confidential information to help start CardioRhythm and then thwarting EPT's merger with Medtronic.

Less than a month later, the lawsuit was settled confidentially. The lawyers for EPT declined to discuss the case. Savage, Thompson and Robbins could not be reached for comment.

Sierra general partner Jeffrey Drazan said he did not recall the details of the case.

In 1996, EP Technologies was acquired by Boston Scientific.

SUDDEN INTERFERENCE, 1994

ASCNet was ready for the market.

The company had developed a wireless phone system to connect motorists with a 24-hour help line and road service, and several organizations serving seniors and motorists were already promoting the product.

But when word of the company's wireless technology reached Drazan at Sierra Ventures, ASCNet claims it quickly found out what can happen when venture capitalists want in on a deal.

Drazan had come to Silicon Valley from New York in 1984, a Long Island doctor's son with an engineering degree from Princeton and an MBA from New York University's Graduate School of Business Administration.

At Sierra he prided himself on his ability to move fast, to decide quickly whether a company deserves funding and then to assert control. His approach was often successful, but some company executives refused to work with him.

"He is fiery tempered, quick to draw," said one company founder who turned down financing from Sierra when Drazan insisted that the firm be the sole investor. "He just brazenly thinks that he's smarter than any of the entrepreneurs in his portfolio companies."

Drazan thought ASCNet's "Road Phone" might be useful to one of Sierra's other investments, a Sunnyvale firm called Air Communications, which was struggling to develop a combination cellular phone, fax and modem.

Over the next few months, Drazan and Air Communications chief John Soden talked to ASCNet about licensing the wireless technology. They even raised the possibility of acquiring ASCNet.

But the Road Phone was ready for sale and ASCNet was running low on cash. On August 30, 1994, it agreed to accept $1.5 million from Nassgil Financial.

The next day, Drazan and Soden called Nassgil and asked for a meeting, according to court documents. In the afternoon, they sat down with Nassgil's president, Gabriel Nassar, and its attorney, Paul Konalpelsky, and asked whether Sierra Ventures and Air Communications could get a piece of the ASCNet deal.

When Nassgil said no, Drazan allegedly threatened to block its investment in ASCNet. He told Nassar and Konalpelsky that ASCNet's board was in disarray and that he commanded the support of the company's shareholders and directors.

Unnerved by the threat, Nassgil withdrew its offer of financing. Within a month, ASCNet was out of business.

Drazan disputes the allegations, which are contained in a lawsuit filed against Sierra Ventures and Air Communications.

He said he met with Nassgil at ASCNet's request, and after a one-hour discussion he left with the possibility of a Sierra investment still open.

"I went to Australia, and when I got back there was a lawsuit on my desk," he said. "It was ridiculous."

The lawsuit accused Drazan and Sierra Ventures of illegally interfering with ASCNet's deal with Nassgil. It was settled confidentially, and Konalpelsky refuses to comment on the case.

Later, Sierra unloaded its investment in Air Communications, deciding, says Drazan, that the company's product "was a silly idea."

But he never expected to be dumped abruptly by his attorney, who Sollars claims sided with the three former partners trying to gain control of his company.

Lawyers say it happens all the time in Silicon Valley: An entrepreneur trusts the attorney he hired to continue to represent him, only to find that the attorney has chosen instead to represent a company, its investors -- or even the people the entrepreneur has engaged in battle.

Sollars had worked at Intel and Sun Microsystems designing computer chips. In his spare time he had invented a unique component for microprocessors used in cell phones. He believed the device was good enough to be the foundation of a profitable business, but he also knew he needed help starting a company.

Goodrich incorporated the new company in April, but by then Sollars and the other three partners had started quarreling. They couldn't decide how to divide control and ownership of the company, how to share its assets or how to structure its business.

The disagreements eventually made it impossible for Sollars to proceed, so in December 1995, he resigned from Infinite Solutions. And because Infinite Solutions was based on his technology, he demanded that the company be dissolved.

But according to allegations in court documents, Yarlagadda refused to give up the technology. In fact, he told Sollars, he and the other two partners intended to use it in a new business with fresh investors.

Sollars and Yarlagadda took their disagreement to Goodrich, who informed them that Sollars didn't own the disputed technology and should negotiate a settlement among the partners, the court documents say. But when negotiations started, Sollars says he discovered that Goodrich was representing Yarlagadda and the other partners against him.

Sollars was furious at what he viewed as his lawyer's betrayal. He hired another attorney who demanded that Wilson Sonsini stop representing the three partners.

But Goodrich and Wilson Sonsini refused, according to the documents.

Goodrich denied that he had ever represented Sollars individually. The lawyer claimed that he represented Infinite Solutions -- even though he had provided legal advice to Sollars and the other partners long before the corporation existed.

Finally, Sollars sued to stop Wilson Sonsini from representing his former partners -- and after months of negotiations, the law firm withdrew.

Goodrich and Sollars refuse to comment on the case, and Yarlagadda could not be reached for comment.

"Let me be blunt," Sollars said, "the last thing I want to do is to piss off John Goodrich and Wilson Sonsini."

SHAREHOLDERS AGREEMENT, 1998

Vijay Parekh figured he had an ace in the hole, a shareholders agreement designed to preserve his control of the software company he founded the year before.

But when the venture capitalists decided they wanted him to step down as CEO, Parekh discovered how little the document meant.

His company, Manage.com, made software for monitoring computer networks. It had already received a multimillion dollar investment from U.S. Venture Partners when, in July 1998, the firm decided that Manage.com needed more money -- and a new CEO.

Lucio Lanza, U.S. Venture's partner in charge of the company, told Parekh not to worry, according to court documents. He said Parekh would continue to sit on the company's three-man board of directors, and he promised Parekh the job of chief technology officer. It would all be taken care of at the July 13 board meeting, Lanza said.

But at the meeting, Lanza moved to add a fourth director -- his partner Jason Green.

It caught Parekh completely off guard. Appointing a new director wasn't on the meeting's agenda. So Parekh protested, stressing that the company's shareholders agreement specifically prohibited the election of an additional director without the unanimous consent of the original three.

The board turned to Manage.com's lawyer, Thomas DeFilipps of Wilson Sonsini. To Parekh's astonishment, DeFilipps told the board that it could appoint Green without Parekh's consent, the court documents say.

A vote was called. Parekh says he voted against Green's appointment, but the other directors voted in favor.

Several weeks later, Parekh received a copy of the board minutes drafted by DeFilipps. He was stunned to see in a section titled "Election of a New Director" that his vote against Green's appointment had been recorded as an abstention.

Parekh dashed off a letter to DeFilipps. It demanded that the minutes reflect Parekh's vote against Green and that the attorney explain in writing why Green's appointment didn't violate the shareholders agreement.

Three days later, just hours before Manage.com's next board meeting, Lanza stepped into Parekh's office and fired him.

Parekh was crushed. He had lost not only his job and his company, but about 600,000 shares of Manage.com stock scheduled to vest in six more months.

On November 10, Parekh sued U.S. Ventures, Lanza and Wilson Sonsini for allegedly violating the shareholders agreement and firing him without cause.

Although Parekh says the case is being settled, he refuses to discuss it further. Lanza and DeFilipps also decline to comment on the case.

A PAPER FORTUNE, 1999

First they gave Shyam Das millions, then they stripped him of everything.

After 12 years at Digital Equipment Corp. and a few months at California Micro Devices, Das decided to start his own company. The 51-year-old engineer had spent years working alone on the prototype of a new data storage device. And in early 1997, he began looking for financing to construct a new manufacturing facility.

In February, Drazan and Sierra Ventures agreed to invest about $5 million in Das Devices, and Das figured he was in business.

He was also in trouble.

As soon as Drazan joined the company's board, Das' role began to change. His title fell from president to executive vice president. He lost much of his responsibility over the company's technology.

The influx of venture capital and other investments diluted his share of the company's stock from 50 percent to 5 percent.

In June, Drazan allegedly told Das that he wanted to appoint a Sierra investor named Bert Zaccaria to the board. Das reluctantly agreed, but only after Drazan assured him that "you, me and Bert will always be together."

Drazan says he does not recall the conversation, but wouldn't say such a thing because "every director is independent."

A few months later, as the August 1 board meeting was about to begin, the company's CEO handed Das a letter, informing him that he had just been fired.

When Das protested, the directors voted 3 to 2 for his ouster -- with Zaccaria casting the deciding vote.

Drazan contends that Das left the company "by mutual agreement" and received "a very generous exit package." Das says it was small compensation for almost five years of work

and the loss of his dream.

His only consolation was that he still held more than 6 million shares of stock in the company, potentially worth a small fortune if the company was ever sold.

It wasn't long before a deal was in the works.

In 1998, Applied Magnetics Corp. agreed to buy Das Devices, and Drazan and the other investors started calculating how to divide the proceeds.

With the help of company counsel and Wilson Sonsini partner Adam Dolinko, they negotiated an agreement that called for loans to be paid first, then the noncompete agreements, then the series B through E preferred stock and, finally, the series A preferred and the common stock.

The deal went down on Feb. 11, 1999, with Applied Magnetics paying about $65 million in stock for Das Devices.

But after trickling through the descending levels of debt and equity, there was just enough money for the board of directors, Sierra Ventures and the other investors.

Das got nothing. His more than 1.7 million shares of series A preferred stock and 5 million shares of common stock were worthless.

"I was so disgusted, that I decided never to work in that industry again," said Das, who has started a new company, eHoHo.com, specializing in selling houses and household products.

Dolinko refuses to comment on the transaction. Drazan acknowledges that it "wasn't perfect." But he says it "turned out to be a bad deal for everyone.

"We lost our shirt on this thing, and I think it's somewhat pathetic that this guy doesn't appreciate that we did everything we could to save his company."

THE ART OF THE DEAL

It is difficult to believe that anything like a bad deal could ever cross the desk of Larry Sonsini.

The polished top is piled with sets of legal documents as neat as decks of playing cards. The rich green carpet beneath is spotless. The surrounding leather chairs and Chinese paintings are modest and perfectly tasteful.

And yet Sonsini apologizes for the mess.

Today Wilson Sonsini Goodrich & Rosati represents more than half of Silicon Valley's 150 largest public companies. The firm has more than 600 lawyers and expects to hire about 60 next year.

A few firms are bigger, "but none that can throw this kind of firepower at a business of any size," Sonsini said.

"I work harder now than ever," he said.

And making millions of dollars a year has its advantages. Like the home in Woodside, the Porsche and Mercedes, the good cigars and the "little trips away."

But nothing surpasses the pleasure of being the most sought after lawyer in Silicon Valley.

"If you are passionate about what you do," Sonsini said, "you are always trying to perfect your art."

SIERRA VENTURES

Founded in 1982, Sierra Ventures is among the largest venture capital firms in Silicon Valley, managing more than $500 million in funds.

Sierra is run by four general partners and attracts investors -- called limited partners -- ranging from university endowments to prominent executives in the technology industry. The firm concentrates on investing in health-care and information-technology startups.

One of its most successful deals was the 1986 financing of StrataCom Inc., a San Jose telecommunications-equipment maker that was sold to Cisco Systems in 1996 for about $4.5 billion.

WILSON SONSINI GOODRICH & ROSATI

Based in Palo Alto, Wilson Sonsini Goodrich & Rosati represents more than half of Silicon Valley's 150 largest public companies and last year earned profits of $620,000 per partner. Its longtime clients include some of the best-known names in the technology industry, from Seagate to Apple to Hewlett-Packard.

The law firm announced yesterday that it had elected 23 new partners, bringing the total number of partners to 140 out of more than 600 attorneys.

Since 1978, the firm has invested in hundreds of startups that it has taken public.

ABOUT THIS SERIES

This five-part series is based upon thousands of pages of financial reports, internal company memorandums, government records and court documents, as well as scores of interviews with corporate executives, government officials, state and federal prosecutors, judges, lawyers, academicians and entrepreneurs.

Some of those court documents were unsealed only as a result of a court order obtained by The Chronicle in San Mateo Superior Court.

MONDAY

Phantom Riches

Beneath the glimmer of booming Silicon Valley, executives have been accused of lying about products and doctoring their books

YESTERDAY

Hollow Words

Federal prosecutors say white-collar crime is a priority, but they have filed only a few charges against high-tech executives

TODAY

Double-Crossed

Silicon Valley entrepreneurs say they have been betrayed by venture capitalists and lawyers, the very people they asked for help

THURSDAY

Stolen Secrets

Technological breakthroughs are so valuable in Silicon Valley that some company executives are willing to do almost anything to get them

FRIDAY

Beyond the Law

As the SEC attempts to crack down on improper accounting, a recent federal court ruling threatens future investor lawsuits

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